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So that you didn’t win the $555 million Mega Tens of millions jackpot Tuesday night.
The glass half-full view? Phew! You dodged an enormous tax bill.
In fact, you get one other shot in the subsequent drawing to land a windfall — after which give a boatload of it to Uncle Sam. The national lottery game’s top prize has rolled even further past the half-billion-dollar mark and is value an estimated $630 million for Friday night’s pull.
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If won at that quantity, it will mark Mega Tens of millions’ fifth-largest prize ever, but doesn’t crack the highest 10 biggest jackpots of all time.
And, it will include a large tax bill. Whether the prize is taken as an annuity of 30 payments over 29 years or as a direct, reduced money lump sum, taxes find yourself taking a giant bite out of any winnings.
For this $630 million jackpot, the money option — which most winners select — is $359.7 million. A mandatory 24% federal tax withholding on that quantity would cut back your winnings by $86.3 million.
Nonetheless, since the top federal marginal tax rate is 37% — which applies to income above $539,900 as a single taxpayer or $647,850 for married couples filing jointly — you might expect to owe more at tax time.
One option to reduce your tax bill is to think charitably, based on the American Institute of CPAs: You possibly can contribute money, as much as 60% of your adjusted gross income, to a public charity or a donor-advised fund and get a tax deduction for the quantity within the 12 months you make the donation. You can also create a personal foundation, donate income to it after which determine over time employ it.
If you happen to had no reduction in income, one other 13%, or $46.7 million, can be on account of the IRS ($133 million in all).
That would cut back the windfall to $226.7 million.
There also might be state taxes either withheld or due. Unless you reside where there isn’t any income tax or lottery wins aren’t taxed, those levies might be greater than 10%, depending on where you obtain the ticket and where you reside.
Nevertheless, even after a giant tax bill, the windfall can be greater than most individuals see in a lifetime. It’s advisable that jackpot winners assemble a team of pros to assist navigate the claiming process, including an attorney, financial advisor and tax advisor.
The prospect of a single ticket matching all six numbers drawn in Mega Tens of millions is about 1 in 302 million. For Powerball — whose jackpot is an estimated $101 million for Wednesday night’s drawing — it’s 1 in 292 million.